Just in From Spain

Published on: 14:56PM Sep 13, 2008

By Jim Wiesemeyer
via a special arrangement with Informa Economics, Inc.

What I Was Asked, and Told in Spain

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I decided to take a quick vacation to Spain while lawmakers came back to town because, frankly, I wanted off one time when lawmakers were not. It looks like my week-long respite produced nothing of significance in Washington -- no great change from the past.

The following are some nuggets from Madrid that you may find useful, and some of my comments on what USDA Secretary Ed Schafer said this week regarding corn-based ethanol subsidies (incentives for those supporting the subsidies).

-- Who's going to win the U.S. presidential race? When I presented my passport in Madrid, Spain, the officer quickly asked me, "So who is going to win the U.S. presidential election?" I answered, "It is too close to call but my hunch is McCain-Palin by a very close vote. But watch the polls after the first presidential debate." The officer then exclaimed, "I hope it's Obama." Wherever I went in Spain it was the same -- "We want Obama." They had no idea who Biden was.

-- Whopper of a price for Big Mac: The price of a typical McDonald's hamburger in Spain: at least 6 Euros -- about $8.46.

-- In talking with people from Madrid, besides the presidential election, they asked or told me the following:

-- "Why doesn't the U.S. use more nuclear energy?" My response: environmentalists. Their response: "What?"

-- "Why doesn't the U.S. have more Smart cars?" My response: They are coming, a little late, but better than never.

-- "How do your livestock producers cope with the price of U.S. feed?" My response: with losses, not profits.

-- "Are we in a world recession?" My response: We don't have the figures yet to confirm, but the more I travel the answer is, yes.

On the domestic front, I received several e-mails regarding USDA Secretary Ed Schafer's comments this week regarding corn-based ethanol subsidies.

What Schafer said, according to Reuters: Schafer said that cuts in government ethanol subsidies are needed. "The ethanol industry has incorporated the fact there are subsidies into their operational, financial models. I think that is a mistake," Schafer said at a conference in Kansas City. "They are going to have to see a gradual ... step-down reduction in subsidies."

Biofuels plan coming. USDA and the Environmental Protection Agency will roll out a biofuels action plan within the next few weeks, Schafer said. The plan will lay out what elements of the biofuels industry the government sees as sustainable and outline the government's ability to support the industry.

My comments:

1. Schafer will always spout what the White House wants him to.

2. The ethanol use mandate was pushed by both Pres. Bush and Democratic leadership, so that should hold for now, despite going too far too fast, according to some.

3. People in the Bush administration, including the Council of Economic Advisers and Treasury, are saying ethanol should start standing on its own -- thus the comments of PHASING down the blender credit and eventually eliminating the import tariff. The last Bush budget request had an elimination of the ethanol import tariff.

4. Most important: Congress will determine the fate of the blender credit and import tariff, and for now, ethanol is still Apple Pie and thus very few changes are likely in the short run.

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